Colliers North American Industrial Highlights Q2 2013
1. K.C. CONWAY Chief Economist | USA
KEY TAKEAWAYS
• North America is still working on the railroad.
Railroad hiring in June grew for the fifth consecutive
month, the highest level of total railroad employment
(164,659 jobs) since July 2008. Manufacturing and
warehousing contributed a combined 26,000 jobs to
the disappointing 162,000 net jobs created in August.
• What could derail industrial’s recovery? For the ninth
consecutive quarter, the aggregate North American
vacancy rate declined for the 77 markets tracked by
Colliers. Q2 vacancy is down 2 basis points to 8.18%
(8.63% among the primary 65 U.S. markets and
4.37% among the 12 primary Canadian markets)
despite the addition of 23.7 MSF of new supply.
• Both the PMI and Rail Time Indicators show that 2H 2013 will remain strong for manufacturing
and industrial activity. August’s PMI of 55.7 was the highest since June 2011, and YTD 2013.
• Absorption remains strong despite sub-200K monthly job growth. On the heels of nearly
71 MSF of net absorption in Q4 2012, the market absorbed another 92 MSF in 1H 2013
(50.5 MSF in Q1 and 41.5 MSF in Q2.)
• Global GDP forecasts are below trend. The IMF’s 2H 2013 GDP forecasts for both Emerging
Markets and Advanced Economies appear to be flattening. Lack of robust global GDP growth
may impact U.S. industrial real estate as early as 1H 2014.
• Leadership in warehouse leasing continues to come from the inland distribution markets.
Six of the top 10 MSAs for Q2 absorption were inland distribution or emerging inland port
markets (Atlanta, Dallas, Denver, etc.). Los Angeles and Jacksonville, FL, were the only port
markets in the top 10 for Q2 2013.
• New supply continues to increase, but is neither excessive nor speculative. According to Dodge
Pipeline, new industrial construction in Q2 increased 28% to 52 MSF. However, this level of new
supply is approximately the quarterly average net absorption since Q1 2012 (45 MSF), and more
than half is pre-leased or build-to-suit distribution centers for major retailers and manufacturers
(Amazon, Nike, Ross, etc.)
Still working on the
Railroad “all the live-long day…”
HIGHLIGHTS
NORTH AMERICA
WWW.COLLIERS.COM
Q2 2013 | INDUSTRIAL
N.A. INDUSTRIAL MARKET
SUMMARY STATISTICS, Q2 2013
US
Q2
2013
US
Q3
2013*
Canada
Q2
2013
Canada
Q3
2013*
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE**
*Projected, relative to prior period
**Warehouse rents
MARKET INDICATORS
Relative to prior period
US CAN NA
VACANCY RATE (%)* 8.63 4.37 8.18
Change from Q1 2013 (%) -0.20 0.24 -0.15
ABSORPTION (MSF) 42.0 -0.5 41.5
NEW CONSTRUCTION (MSF) 17.9 5.8 23.7
UNDER CONSTRUCTION (MSF) 74.3 11.7 86.0
*As a result of an inventory re-classification of certain property
sub-types, 1Q13 and 2Q13 vacancy rates were adjusted in Q2.
ASKING RENTS
PER SF (USD/CAD) US CAN NA
Average Warehouse/
Distribution Center
4.81 7.73 5.27
Change from Q1 2013 (%) 1.12 1.47 1.20
I’ve been working
on the railroad
All the live-long day.
I’ve been working on
the railroad
Just to pass the time away.
Can’t you hear the whistle blowing,
Rise up so early in the morn;
Can’t you hear the captain shouting,
“Dinah, blow your horn!”
2. HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
Still working on the
railroad “all the
live-long day”
Few areas of the U.S. economy have turned in
as consistent a recovery since 2009 as the rail-
road industry. Whereas the overall labor market
has sputtered, unable to produce even 200,000
net new jobs per month (198,000 per month in
1H 2013—and only 148,000 per month from
June to August), railroad employment has been
consistently adding jobs. Railroad employment
in June saw its fifth consecutive month of
growth, and reached its highest total—165,000—
since July 2008.
P. 3 | COLLIERS INTERNATIONAL
135,000
140,000
145,000
150,000
155,000
160,000
165,000
170,000
2006 2007 2008 2009 2010 2011 2012 2013
May 2013 to
June 2013: +220
CLASS I RAILROAD EMPLOYMENT | JAN 2006–JUNE 2013
Increases of approx. 1,000 employees after Jan. 2013 reflect acquisition of two large railroads by a Class I
railroad. Data not seasonally adjusted. | SOURCE: Surface Transportation Board
94
96
98
100
102
104
106
108
110
112
114
2010 2011 2012 2013
EMPLOYMENT | JAN 2010–JUNE 2013 (JAN 2010 = 100)
SOURCE: Surface Transportation Board, Bureau of Labor Statistics
Class I Railroad Employment vs. Employment for All U.S. Industries
Sq. Ft. By Region
Absorption Per Market (SF)
q1 '13 - q2 '13
4,600,000
2,300,000
460,000
-460,000
-2,300,000
-4,600,000
4 billion
2 billion
400 mil
Occupied Sq. Ft.
Vacant Sq. Ft.
NORTH AMERICAN INDUSTRIAL VACANCY, INVENTORY AND ABSORPTION | Q2 2013
3. HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 4
INTERMODAL TRAFFIC | CONTAINERS & TRAILERS
Month Current Year Previous Year Percent Change
June 2012 248,999 236,714 5.2%
July 2012 236,515 223,910 5.6%
August 2012 246,194 235,969 4.3%
September 2012 246,118 237,397 3.7%
October 2012 246,695 242,953 1.5%
November 2012 233,649 230,769 1.2%
December 2012 222,001 218,328 1.7%
January 2013 233,726 222,065 5.3%
February 2013 245,770 222,462 10.5%
March 2013 233,302 232,087 0.5%
April 2013 240,505 236,742 1.6%
May 2013 242,823 235,665 3.0%
June 2013 252,347 248,999 1.3%
July 2013 243,725 237,859 2.5%
SOURCE: AAR Rail Time Indicators
150,000
200,000
250,000
300,000
2009 2010 2011 2012 2013
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
AVERAGE WEEKLY U.S. RAIL INTERMODAL TRAFFIC
Data are weekly average originations for each month, excluding U.S. operations of CN and CP, and reflect
revisions to original reporting. | SOURCE: AAR Weekly Rail Traffic
-10
-8
-6
-4
-2
0
2
4
6
2.7
1.5
2
-2.7
-2
-8.3
-5.4-5.4
-0.4-0.4
1.3
3.93.9
1.6
3.93.9
-1.3-1.3
2.8 2.82.8 2.8
3.23.2
1.41.4
4.94.9
3.73.7
1.2
2.82.8
0.1
1.1
2.52.5
1H ‘10
1H ‘11
1H ‘12
1H ‘13
UNITED STATES GDP GROWTH RATE (% CHANGE)
SOURCE: www.tradingeconomics.com | Bureau of Economic Analysis
And if these employment statistics are not enough to switch your thinking
to the other side of the track (you know, the growth track), consider the
increases in traffic:
Total intermodal traffic has shown year-over year growth every month
since December 2009 (44 consecutive months), and is up 4.3 percent for
1H 2013. This is a direct result of growth in manufacturing and exports.
These railroad employment and intermodal traffic metrics mean more
demand for U.S. industrial warehouse space, which has translated into a
ninth consecutive quarter of improving occupancy, absorption and rental
rates for North American industrial real estate—especially in the U.S.,
where vacancy compressed another 20 basis points to 8.63%, despite the
addition of another 17.9 MSF of space. Don’t be so quick to believe those
Federal Reserve Bank district manufacturing surveys created from anec-
dotal information collected from statistically invalid samplings of manufac-
turers. Believe what is occurring on the railroads “all the live-long day.”
The Association of American Railroads (AAR) counts it all every month and
publishes the findings in Rail Time Indicators, the best forward-looking
monthly industrial report you can find. Why use survey data when you can
access robust primary data?
Beyond AAR’s Rail Time Indicators, other economic measures—such as
GDP and the Institute for Supply Management’s Purchasing Managers’
Index™ (PMI)—indicate that growth in 2H 2013 growth will be volatile and
probab ly weaker, due to the return of uncertainty.
Let’s start with GDP, which is on another roller coaster ride. The “Advance
Estimate” of Q1 GDP was 2.4%, which was finally revised to a disappoint-
ing 1.1%. The “Advance Estimate” for Q2 was just 1.7%, but then underwent
an initial revised estimate at the end of August upward to a surprising
2.5%. Q2 GDP won’t be finalized until September 26. However, given the
troubling August jobs report, and the horrific track record of Bureau of
Economic Analysis (BEA) in guesstimating GDP, the only certainty is that
Q2 GDP will be anything but the BEA’s 2.5% forecast. The relevant take-
away from GDP is the trend, that suggests that U.S. GDP is slipping back to
an anemic level on par with 2H 2009, or even 2H 2012—when the looming
uncertainty of the elections, sequestration, budget cuts, and the implemen-
tation of tax increases and Obamacare sucked the life out of business and
consumer confidence. The latest report on GDP also notes that the weak-
ness in economic growth is most pronounced in declining government ex-
penditures at the federal, state and municipal levels. This will only intensify
with Congress at an impasse with the White House over deficit spending
and further tax increases.
4. P. 5 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
In addition, the International Monetary Fund (IMF) has lowered its forecast
for 2013 Global GDP Growth to approximately 3%. The IMF’s updated July
2013 global GDP forecast, stratified for “Emerging Markets” (like those in
LATAM) and “Advanced Economies” (such as the United States, Europe
and Japan), shows a flattening trend for both.
SOURCE: Institute of Supply Management
MONTH PMI MONTH PMI
Aug 2013 55.7 Feb 2013 54.2
Jul 2013 55.4 Jan 2013 53.1
Jun 2013 50.9 Dec 2013 50.2
May 2013 49.0 Nov 2012 49.9
Apr 2013 50.7 Oct 2012 51.7
Mar 2013 51.3 Sep 2012 51.6
Average for 12 Months: 52.0 (High: 55.7 | Low: 49.0)
8.3% 1.4%
40.9%
66.7%
55.6% 60.0%
66.7%
54.2% 56.3%
59.1%
33.3%
44.4% 40.0%
25.0%
45.8% 42.3%
8.3% 1.4%
40.9%
66.7%
55.6% 60.0%
66.7%
54.2% 56.3%
59.1%
33.3%
44.4% 40.0%
25.0%
45.8% 42.3%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
West South Northeast Midwest Canada U.S. N.A.
Contract Holding Steady Expand
OF THE LEASES SIGNED THIS QUARTER*, DID MOST TENANTS...?
*Excluding renewals % of Reporting Markets
80.0% 77.8%
66.7%
81.8%
25.0%
76.3%
67.6%
10.0% 22.2%
33.3% 9.1%
58.3%
18.6%
25.4%
10.0% 9.1% 16.7%
5.1% 7.0%
80.0% 77.8%
66.7%
81.8%
25.0%
76.3%
67.6%
10.0% 22.2%
33.3% 9.1%
58.3%
18.6%
25.4%
10.0% 9.1% 16.7%
5.1% 7.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Midwest Northeast South West Canada U.S. N.A.
Down Same Up
3-MONTH FORECAST FOR VACANCY LEVELS (relative to current quarter)
% of Reporting Markets
8.3%
1.7%
2.8%
10.2%
8.5%
33.3%
25.4%
26.8%
41.7%
61.0%
57.7%
16.7%
1.7%
4.2%
8.3%
1.7%
2.8%
10.2%
8.5%
33.3%
25.4%
26.8%
41.7%
61.0%
57.7%
16.7%
1.7%
4.2%
0% 20% 40% 60% 80% 100%
Canada
U.S.
N.A.
Declining Bottoming No Clear Direction Increasing Peaking
CHARACTERIZE CURRENT INDUSTRIAL RENTS IN YOUR MARKET
% of Reporting Markets
10.0%
1.7% 1.4%
50.0%
33.3%
61.1%
18.2%
83.3%
39.0% 46.5%
40.0%
66.7%
38.9%
81.8%
16.7%
59.3% 52.1%
10.0%
1.7% 1.4%
50.0%
33.3%
61.1%
18.2%
83.3%
39.0% 46.5%
40.0%
66.7%
38.9%
81.8%
16.7%
59.3% 52.1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Midwest Northeast South West Canada U.S. N.A.
Down Same Up
3-MONTH FORECAST FOR RENTS (relative to current quarter)
% of Reporting Markets
-1
0
1
2
3
4
5
6
7
2011 2012 2013
Advanced economies World Emerging market and developing economies
GLOBAL GDP GROWTH | % QUARTER OVER QUARTER, ANNUALIZED
SOURCE: IMF staff estimates
At some point the absence of more robust global GDP growth will begin to
impact U.S. industrial real estate. This is most likely to occur in 1H 2014 as
all but U.S. energy and agricultural exports see lower demand from
Emerging Markets and Advanced Economies alike. All those companies
that have on-shored their manufacturing (or are in the process of doing so),
may be hard-hit in 2014 by anemic global GDP and higher interest rates
caused by tapering off of quantitative easing by the Federal reserve.
The closely watched PMI is another key economic metric for industrial real
estate. Like Rail Time Indicators, the PMI is encouraging. It, too, is indicating
reason for optimism in 2H 2013: After a disappointing reading below 50 in
May, the PMI has rebounded over the summer, with three consecutive
readings above 50. August’s 55.7 measure is the highest reading in 2013,
and the highest since June 2011.
5. HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 6
MANUFACTURING AT A GLANCE | APRIL 2013
INDEX
SERIES INDEX
APRIL
SERIES INDEX
MARCH
CHANGE
(%)
DIRECTION
RATE
OF CHANGE
TREND*
(MONTHS)
PMI 55.7 55.4 +0.3 Growing Faster 3
New Orders 63.2 58.3 +4.9 Growing Faster 4
Production 62.4 65.0 -2.6 Growing Slower 3
Employment 53.3 54.4 -1.1 Growing Slower 2
Supplier Deliveries 52.3 52.1 +0.2 Slowing Faster 2
Inventories 47.5 47.0 +0.5 Contracting Slower 2
Customers' Inventories 42.5 47.5 -5.0 Too Low Faster 21
Prices 54.0 49.0 +5.0 Increasing
From
Decreasing
1
Backlog of Orders 46.5 45.0 +1.5 Contracting Slower 4
Exports 55.5 53.5 +2.0 Growing Faster 9
Imports 58.0 57.5 +0.5 Growing Faster 7
OVERALL ECONOMY Growing Faster 51
Manufacturing Sector Growing Faster 3
*Number of months moving in current direction | SOURCE: Institute of Supply Management
Aside from the macro PMI measure, the detail behind it is revealing. The latest reading for August showed growth in several key areas, such as new
orders, production and employment. It also indicated that inventories were contracting (meaning that wholesalers and retailers will need to re-stock
prior to the holiday shopping season), and exports were still growing. This later item adds weight to the view that Europe may have bottomed, and LATAM
is still experiencing robust growth.
DIGGING INTO THE NORTH AMERICAN
INDUSTRIAL VITAL STATS
North American industrial warehouse markets have pitched what baseball
fans would call a “perfect game:” nine successive quarters of declining
vacancy rates, with net absorption outpacing new supply by more than 2:1.
Since Canadian markets account for only 10 percent of North American
warehouse space—and these 12 markets have maintained a stable
vacancy rate of approximately 5 percent with only moderate new supply—
the improvement in these North American industrial metrics is largely
due to strong performance by the primary 65 U.S. warehouse markets.
One wonders what can “derail” industrial real estate performance. In our
previous Industrial Outlook report we referenced several articles that
weighed the risks posed by a potential stock price bubble, and the track
ahead is far from clear. Waiting around the bend are several signs of
uncertainty: “Steep Grade” (the pending departure of Federal Reserve
Chairman Ben Bernanke and the possible impact on Fed policy), “Switch
Closed” (the renewed congressional showdown over the deficit ceiling),
and “Runaway Train” (instability in the Middle East). To avoid disaster,
industrial real estate—along with all property types—may have to pull into
a siding during 2H 2013.
6. P. 7 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
NORTH AMERICAN INDUSTRIAL OVERVIEW | Q2 2013
MEASURE NORTH AMERICA CANADA UNITED STATES WEST/ MIDWEST SOUTH NORTHEAST
# of Markets 77 12 65 35 21 9
Inventory (MSF) 16,087.0 1,722.8 14,364.2 8,027.0 4,131.2 2,206.0
% of N.A. Inventory 100% 10.7% 89.3% 49.9% 25.7% 13.7%
New Supply (Q2 2013, MSF) 23.7 5.8 17.9 9.4 7.0 1.5
% of N.A. New Supply 100% 24.5% 75.5% 39.7% 29.4% 6.4%
Vacancy (%) 8.18% 4.37% 8.63% 7.88% 9.50% 9.74%
Absorption (MSF) 41.5 (0.5) 42.0 24.1 16.2 1.7
% of N.A. Absorption 100% -1.2% 101.2% 58.0% 39.0% 4.2%
Leadership Markets Absorption: Calgary,
Waterloo and Saskatoon
(All with more than
200K SF of net
absorption in Q2.
Calgary led with 671K
SF of net leasng
activity.)
Absorption: Inland
markets (with the
exception of LA and
Long Island) Atlanta (4.5
MSF); Dallas/Ft. Worth
(3.8 MSF); Inland Empire
(3.6 MSF); Denver and
San Jose (each with 1.8
MSF); Columbus, OH,
Charlotte, Greenville, SC,
and Jacksonville
(all > 1.4 MSF)
Absorption: Inland
Empire (3.6 MSF); San
Jose & Denver (each
with 1.8 MSF), Los
Angeles (1.65 MSF)
and Columbus, OH, (1.4
MSF…air cargo matters).
Absorption: Atlanta
(a repeat with 4.5
MSF), DFW (3.8 MSF),
Charlotte, NC, (1.75
MSF, housing recovery),
and Greenville, SC, and
Jacksonville (1.4 MSF,
new inland port and port
strength).
Absorption: The story
here is Philadelphia
(1.0 MSF, energy and the
Inland Empire of the NE)
and Long Island
(Hurricane Sandy
rebuild).
Laggard Markets Absorption: Toronto,
Winnipeg and
Vancouver (net
negative in Q2).
Vacancy: Halifax,
Waterloo and Calgary
(above 5.5%).
US CAN NA
Vacancy Rate 8.63% 4.37% 8.18%
Change from Q1 2013 -0.20% 0.24% -0.15%
Behind the Statistics &
Beyond the Basics:
Scope of Colliers Industrial Outlook Report: Colliers monitors industrial
property conditions in 77 North American markets from Miami to Montreal,
totaling 16.1 billion square feet of inventory. Approximately 89 percent (14.4
billion square feet) of this inventory is located in the United States.
Despite a comparatively small adjustment to inventory classification (see
note at top right), the U.S. West and Midwest continue to constitute
approximately 60 percent of North American industrial warehouse space
NOTE: Colliers’ Q2 U.S. inventory numbers have declined slightly from previous
reports (approximately 1.5 percent, or 191 million square feet) due to a culling of
specialty warehouse property types (e.g., self storage). This change aligns MSA
inventory levels with industry sources, such as CoStar, that increasingly exclude
specialty warehouse property from bulk and distribution warehouse measures. This
adjustment was not necessary in Colliers’ Canadian markets.
VACANCY
Vacancy continues to decline in North American warehouse markets—
much more in U.S. markets, due to a greater oversupply than in Canada and
the incredible onshoring of manufacturing. From a regional perspective,
Canada has the lowest average vacancy rate in North America (4.37 per-
cent, up 24 basis points from Q1 2013, due primarily to new construction
activity), and the Northeast U.S. continues to have the highest vacancy rate
at 9.74 percent (up 18 basis points from Q1 2013). The West and Midwest
are the only two regions in the U.S. with vacancy rates below the 8.63
percent national average.
(8.0 billion square feet), and approximately 60% of annual U.S. net leasing
activity. The South is the next-largest region, with 4.1 billion square feet,
or 26% of North American industrial warehouse space. The expansion of
the Panama Canal—and the addition of at least five more post-Panamax
ports to the East and Gulf coasts, will only enhance the market share of key
inland and port distribution markets in the southeastern and southwestern
U.S. by 2015. With respect to the numbers for Q2 2013, the following table
tells the story:
7. HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 8
TOP 23 NORTH AMERICAN INDUSTRIAL MARKETS WITH
VACANCY BELOW NORTH AMERICAN AVERAGE
VACANCY
RANKING
MSA
Q1 2013
VACANCY
RATE (%)
MARKET
PROFILE
1
CANADA
Vancouver 4.1
3rd largest Canadian
industrial market
2 Toronto 4.1
2nd largest Canadian
industrial market
3 Montreal 4.5
Largest Canadian
industrial market
4 Calgary 5.45
4th largest Canadian
industrial market
5
UNITEDSTATES
Honolulu 3.2
Top-20 North American
port
6 Los Angeles 3.5
Busiest North American
TEU container port
7 Bakersfield, CA 4.4 –
8 Orange County, CA 4.7 –
9 Houston 5.1 Busiest Gulf Coast port
10 Omaha, NE 5.35
11 Seattle 5.5
PPMX port/Top-20
North American port
12 Long Island 5.5 Port of NY influence
13 Kansas City 6.1
Top-10 North American
intermodal rail
14 Miami 6.6
Top-20 North American
port to Latin America
15 Boise, ID 6.7
New to top-20 rankings
for low vacancy
16 Indianapolis 6.7
Key intermodal link to
Port Rupert
17 Grand Rapids 6.9
Proximity to Great Lakes
ports and rail
18 Milwaukee 6.9
Key Great Lakes region
port
19 Columbia, SC 7.0
Benefiting from port of
Charleston
20 Oakland, CA 7.0
PPMX port/Top-20
North American port
21 Portland 7.2
Labor issues have
impacted vacancy
22 Columbus, OH 7.3
Top-5 air cargo market;
link to port of Virginia
23 West Palm Beach, FL 7.35
Benefitting from South
Florida trade to LATAM
24 Denver 7.35
Top 10-intermodal rail &
air cargo
24 San Francisco 7.4 Vital West Coast port
25 Cincinnati 7.8
Key Midwest
manufacturing &
industrial market
26 Minneapolis 7.85
Key Midwest
manufacturing &
industrial market
27 Pittsburgh 7.9
Key Midwest
manufacturing &
industrial market
28 St Louis, MO 8.18
The River City is
revitalized
Drilling down to the MSA level, vacancy continues to improve the most in
primary port cities, and inland distribution markets with large intermodal
facilities. In Canada, among the four industrial markets with at least
100 MSF of inventory, vacancy rates are lowest in Vancouver (4.09
percent, up 59 basis point from Q1), Toronto (4.11 percent; this quarter’s
22 basis points increase is the third in a row), Montreal (up 73 basis
points, 4.49 percent, and the only large Canadian warehouse market to
decline, down by 1 basis point), and Calgary (up 73 basis points to 5.45
percent, the largest increase over Q1 for large Canadian markets).
In the U.S., seventeen markets have a vacancy rate below 7 percent and
approximately 100 basis points below the North American average of 8.18
percent. It is also important to note that 19 of the 32 U.S. markets with
vacancy rates below the 8.68% national average are top-20 North American
port or top-ten inland distribution or air cargo markets with intermodal rail
connecting to one or more of the seven North American Class I railroads.
ABSORPTION
Over the preceding three quarters (Q4 2012–Q2 2013) an average of
54 MSF of industrial space was absorbed in North America. With Canada
averaging a modest 1.5 MSF per quarter, the majority of this absorption
has come from U.S. markets. In Q2, Canada experienced net negative
absorption of 500,000 square feet, versus the U.S. markets which leased
42 MSF (down slightly from 47 MSF in Q1). What constitutes the weaker
absorption in Q2 for both the U.S. and Canada?
In Canada, the negative absorption is attributable to the addition of new
supply relative to the size of Canadian markets. The 12 primary Canadian
industrial markets (1.7 billion square feet in size) added 5.8 MSF of new
supply in Q2. That new supply translates to 0.34% of Canada’s warehouse
inventory. In contrast, the addition to new supply in the U.S. during Q2
translated to just 0.001% of existing inventory. In other words, Canada is
adding new supply at a pace that is excessive for its size. In contrast, while
the U.S. is also adding new supply, demand far exceeds the pace of new
deliveries. The U.S. markets delivered 17.9 MSF of new warehouse space
in Q2, but experienced 42.0 MSF of net leasing activity. This ratio of more
than 2:1 absorption to new supply has been the norm for the U.S. ever
since 2011. With 52 MSF of total new supply underway in the U.S.
for delivery over the next 2–4 quarters and an average quarterly
absorption rate of 45 million square feet, the U.S. should continue to see
further decline in vacancy in 2H 2013. Overbuilding risk is not a concern in
U.S. industrial markets, but it is in Canadian markets.
From a regional perspective, net absorption is strongest in the West
(16.9 MSF) and South (16.1 MSF), followed by the Midwest (7.1 MSF) and
then the Northeast with just 1.7 MSF. The market leadership in warehouse
leasing during Q2 came from Los Angeles, San Jose and Denver in the
West; Atlanta, Dallas, Charlotte and Greenville/Spartanburg SC (fueled by
the new Port of Charleston Inland port) in the South; Columbus, OH (air
cargo), St. Louis and Kansas City (new intermodal facility coming on line)
in the Midwest; and Philadelphia (energy and Inland Empire of the
Northeast), Long Island and Baltimore (newest post-Panamax port along
East Coast) in the Northeast.
8. P. 9 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
Rounding out the top ten this quarter are Charlotte (housing recovery);
the Port of Los Angeles (1.65 MSF), Columbus, OH, (strength as an air
cargo hub); Greenville/Spartanburg, SC, (influence of new Inland Port by
Charleston); and Jacksonville, FL, (watch for Colliers’ upcoming North
American Port Analysis report for the “audible” that the port of Jacksonville
has called that’s making a positive impact on industrial real estate).
STATE
NEW
WAREHOUSE
CONSTRUCTION (MSF)
LARGEST
DISTRIBUTION CENTERS
UNDER CONSTRUCTION
Texas 7.0
Amazon: three >1.0 MSF centers in
Dallas and San Antonio
Restoration Hardware: 850,000 SF in
Grand Prairie (Dallas, TX)
L’Oreal: 500,000 SF in suburban Dallas
New Jersey 4.9 Amazon: 1.0 MSF in Trenton
Georgia 3.6
Home Depot: 1.0 MSF in Atlanta
Tractor Supply: 700,000 SF in Macon
(Atlanta area)
Illinois 3.1 Trader Joe’s: 800,000 SF in Chicago
Arizona 2.0
American Furniture: 632,000 SF outside
Phoenix
Ohio 2.8 Tween: 750,000 SF
Florida 2.7
Publix and O’Reilly Auto Parts:
Orlando and Lakeland
Pennsylvania 0.7 PetSmart and Dollar General
MSA Q2 2013 (MSF) MSA CY 2012 (MSF)
1 Atlanta
(INTERMODAL)
4.5 Chicago 13.438
(INTERMODAL)
2 Dallas
(INTERMODAL)
3.8 Dallas 9.728
(INTERMODAL)
3 Los Angeles
(INLAND EMPIRE)
3.6 Detroit 9.169
(AUTO RECOVERY)
4 San Jose 1.85
Los Angeles –
Inland Empire
8.470
(INTERMODAL)
5 Denver
(INTERMODAL)
1.8
Los Angeles –
Coastal
8.375
(PORT)
6 Charlotte, NC
(HOUSING)
1.75 Atlanta 7.400
(INTERMODAL)
7
LA – Port
(#1 IN NORTH
AMERICA TEU)
1.65 Houston 6.245
(PORT)
8 Columbus, OH
(AIR CARGO)
1.45 Phoenix
5.137
(HOUSING
RECOVERY)
9 Greenville, SC
(INLAND PORT)
1.4 Columbus, OH 4.916
(AIR CARGO)
10 Jacksonville, FL
(PORT)
1.35 Seattle 3.916
(PORT)
TOP 10 U.S. INDUSTRIAL MARKETS | ABSORPTION | Q2 2013 VS CY 2012
As was the case in Q1 2013 and 2H 2012, Inland markets are outpacing
port markets in absorption. The top 5 markets with respect to net
warehouse absorption Q1 2013 versus Q2 are as follows:
CONSTRUCTION ACTIVITY
Finally, after nine innings of a perfect game, new construction is picking
up in response to both demand and the improved industrial real estate
metrics (occupancy, absorption, and rents). Not only is there a dearth of
product for sale, but an estimated 40% of existing U.S. warehouse space
is functionally obsolete (less than 28-foot clear height, etc.). There is also
an added urgency to obtain modern distribution space on the part of
retailers and manufacturers remaking their supply chains with modern
distribution facilities aligned with key post-Panamax ports, intermodal
rail facilities, and air cargo/e-commerce fulfillment paths. In Q1, new
construction activity increased by 27 percent, from 32 MSF at year-end
2012 to 40.6 MSF. In Q2, that increase in new supply continued with
another near 25% increase in activity (24% or 52 MSF). The ten states
with the most warehouse and distribution center space under construction
remain Texas, New Jersey, Georgia, Illinois, Pennsylvania, Ohio, Arizona,
Florida, Utah, and California (Source: Dodge Pipeline, Q1 2013).
Overbuilding risk is a natural concern that arises from such an increase in
new construction activity. While it’s worth monitoring over the next 3–5
quarters, investors and developers can take comfort in two key metrics that
put this construction activity in proper perspective. First, the 52 MSF of
construction reported by Dodge Pipeline is only slightly more than the
average quarterly net absorption over the previous four quarters (45 MSF);
that is, leasing activity is outpacing new construction four to one. Second,
more than half of this new construction is pre-leased or build-to-suit for
owner occupancy by large retailers and manufacturers. National retailers,
such as Amazon, Nike, Ross Dress for Less, Harbor Freight Tools, Dollar
Tree, Family Dollar, FedEx, Home Depot, L’Oreal, Publix, O’Reilly Auto
Parts, Restoration Hardware, Target, Tractor Supply and Whole Foods, are
constructing in excess of 25 MSF of modern distribution and logistics cen-
ters from coast to coast. Here’s a sampling of these projects in the ten
states with the most new construction activity:
MSA Q1 2013 (MSF) MSA Q2 2013 (MSF)
1 Chicago 6.0 Atlanta
4.5
(Inland distribution,
#7 air cargo market)
2 Los Angeles
4.4
(Inland Empire:
2.05 MSF)
Dallas
3.8
(Inland distribution,
re-entering top 5)
3 Atlanta 3.0
LA-Inland
Empire
3.6
(5.45 MSF LA port
+ LA Inl)
4 Detroit 2.3
(Right-to-work impact)
San Jose 1.85
5 Cincinnati 2.1 Denver
1.8
(Inland distribution,
also moving into top 5)
Looking forward to 2014, delayed delivery of new space under construc-
tion is the only significant obstacle to industrial leasing activity in key port
and intermodal markets such as Los Angeles, Seattle, Houston, Memphis
and Greenville, SC. These markets can’t complete new space fast enough
to meet demand, and market forces will likely result in disproportionately
high 2H 2013 net leasing activity, as was the case in 2012.
9. HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 10
Overbuilding risk remains low despite the uptick in new warehouse and distribution center construction during 1H 2013, given the scarcity of debt capital
for speculative construction by banks and the limited amount of speculative warehouse construction underway. If net absorption were to slip in 2H 2013,
and new projects increased at similar 25% rates per quarter, overbuilding would be a concern in 2014.
One danger that spans all commercial property types is rising construction costs. Because Colliers has elevated this item in prior Outlook reports, it should
come as no surprise that construction costs never actually declined during the 2008–2009 financial crisis and ensuing recession. As documented in
Engineering News-Record’s Construction Cost Index, construction costs have risen nearly 20% since Spring 2007, and are up an additional 2.5% in Q2
2013 over Q1. Investors and developers considering new construction investments should budget for construction cost increases at double the Consumer
Price Index (CPI) for 2H 2013 and 2014, due to pressures on labor and materials.
West Coast ILA agreement draws near. And other labor strike issues loom
in trucking and ports in LATAM, Asia and Europe. The eight-day Los
Angeles clerical workers strike last fall demonstrated how disruptive such
stoppages can be to the flow of goods, and many port tenants now have
operational clauses in their leases that provide for rent relief if cargo cannot
move through the ports. Know what’s in your leases.
BLIND SPOT #5: Due Diligence Risk. This is one of the greatest
risks to the industrial market. Sellers are now commanding
shorter and shorter periods of due diligence when selling properties,
owing to the scarcity of available assets, and the attention that industrial’s
continued performance has brought to the sector. In 1H 2013 Colliers saw
due diligence periods compress to 2–4 weeks for several warehouse
properties that either were in growth-restricted MSAs or had investment-
grade tenants. This feeding frenzy for institutional-quality warehouse
assets is shifting due diligence risk from the seller to the buyer. Let the
buyer be prepared: have legal, inspection and environmental vendors ready
to go at the drop of a contract, positioned to close in as little as two weeks.
BLIND SPOT #6: Overlooking adaptive re-use opportunities. Not
all warehouse properties are created equal, and not all markets
can easily develop new supply to relieve demand pressures. As a result,
Colliers is seeing functionally obsolete properties being acquired for
adaptive re-use in growth-restricted port markets. For example, older
manufacturing properties close to the market’s port facilities are being
converted to distribution space in cities such as Los Angeles, San Francisco,
Seattle, Miami, Charleston, and New York. Developers and investors
shouldn’t overlook these adaptive reuse opportunities in this feeding frenzy
to acquire new construction.
In conclusion, industrial has proven to be the Little Engine That Could
over the past nine quarters, but the end of the recovery period means
there are plenty of risks in store that could derail this train as it picks up
steam. So keep one hand on the throttle and one hand on the brake by
understanding the warehouse investment cycle we’ve entered, and keep
your eye on the track ahead.
Conclusion: The Blind Spots
Here’s an update on potential risks we’ve been tracking throughout the year that you should be aware of:
BLIND SPOT #1: The domestic and global risks heading
into 2H 2013 are greater than they were for 1H 2013. Interest rates
have risen approximately 100 basis points this summer ,over fear of the
Federal Reserve tapering its quantitative easing activity at its September
FOMC meeting. And, as Asia slows and Mideast turmoil increases, the IMF
has revised down to 3% its outlook for global GDP growth.
BLIND SPOT #2: Favoring functionally obsolete warehouse space over
modern, in-demand, distribution centers in post-Panamax era
supply-chain markets. A significant portion of existing U.S.
warehouse space is functionally obsolete (clear heights below 30 feet, less
than 60-foot column spacing, etc.), or is located in markets that will not be
central to the post-Panamax supply chain. Modern distribution centers
need 30-foot clear ceiling height for conveyor systems, as well as
connectivity to post-Panamax ports via intermodal rail and proximity to air
cargo centers for e-commerce fulfillment. Distribution, logistic and
e-commerce fulfillment centers along the paths linking ports, intermodal
rail, and air cargo are your geographic sign posts and investment markers.
Be careful what physical product you invest in, and where. Refer to Colliers
1H 2013 North American Ports Analysis for more detailed information, at
www.colliers.com/us/port-1H
BLIND SPOT #3: Elevated new construction activity. Although
the Q1 and Q2 increases in construction activity don’t indicate a
supply-demand imbalance yet, this metric needs to be monitored closely
over the second half of 2013, given the double-digit increase in production.
Six to eight quarters ago, a similar uptick in multifamily coincided with
another “perfect game” (vacancy falling to 5% percent, double-digit rental
increases for eight consecutive quarters, record cap rate compression,
etc.), and today the market is anxious about overbuilding in light of
200,000+ annualized permits.
BLIND SPOT #4: Port and transportation worker strife. Earlier
this year, an ILA strike was finally averted, and a six-year dock
workers contract agreed upon for the East and Gulf coast ports. During the
painful six months of uncertainty, retailers and manufacturers re-routed or
accelerated cargo shipments, and may need to start doing so again on the
West Coast at the end of 2013, as the June 2014 expiration of the existing
10. P. 11 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
UNITED STATES | INDUSTRIAL SURVEY
MARKET
INVENTORY
JUN. 30, 2013
(SF)
Q2 2013
NEW SUPPLY
(SF)
YEAR-TO-DATE
NEW SUPPLY
(SF)
CURRENTLY UNDER
CONSTRUCTION
(SF)
NORTHEAST
Baltimore, MD 221,822,484 119,620 1,161,620 -
Boston, MA 152,836,772 35,000 35,000 1,200,031
Hartford, CT 95,613,351 - – 25,747
Long Island, NY 156,537,930 - – 190,000
New Jersey – Central 353,745,719 - – 1,259,244
New Jersey – Northern 374,436,831 - – 1,444,817
Philadelphia, PA 413,642,758 1,179,250 1,979,530 1,015,300
Pittsburgh, PA 172,208,978 51,571 178,691 247,731
Washington, DC 265,120,048 130,481 778,167 1,966,299
Northeast Total 2,205,964,871 1,515,922 4,133,008 7,349,169
SOUTH
Atlanta, GA 614,441,825 3,832,655 3,832,655 1,927,256
Birmingham, AL 109,682,848 – – 542,000
Charleston, SC 32,758,481 289,000 616,000 316,000
Charlotte, NC 319,330,062 115,615 354,120 52,000
Columbia, SC 38,123,194 – – 1,200,000
Dallas-Ft. Worth, TX 725,941,193 709,953 1,504,012 6,423,508
Ft. Lauderdale-Broward, FL 109,506,688 – 351,614 315,516
Greenville/Spartanburg, SC 177,644,878 – – 156,000
Houston, TX 478,412,510 1,058,764 2,542,228 4,259,723
Jacksonville, FL 122,763,661 92,170 101,770 –
Little Rock, AR 45,095,202 18,376 18,376 –
Louisville, KY 170,832,651 – 15,000 –
Memphis, TN 218,754,141 – 869,892 2,417,206
Miami, FL 209,047,911 207,200 1,121,106 1,095,730
Nashville, TN 114,567,001 – – 2,086,660
Orlando, FL 131,536,721 150,000 150,000 1,065,000
Raleigh, NC 110,892,215 20,850 20,850 26,030
Richmond, VA 109,771,478 311,730 458,302 –
Savannah, GA 44,621,300 – 200,000 1,131,000
Tampa Bay, FL 197,170,619 152,500 188,019 –
West Palm Beach, FL 50,339,047 – – 20,900
South Total 4,131,233,626 6,958,813 12,343,944 23,034,529
11. HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 12
UNITED STATES | INDUSTRIAL SURVEY
MARKET
INVENTORY
JUN. 30, 2013
(SF)
Q2 2013
NEW SUPPLY
(SF)
YEAR-TO-DATE
NEW SUPPLY
(SF)
CURRENTLY UNDER
CONSTRUCTION
(SF)
MIDWEST
Chicago, IL 1,316,302,590 2,411,337 3,997,878 4,501,811
Cincinnati, OH 244,257,287 – 697,938 649,000
Cleveland, OH 498,640,441 23,186 23,186 13,300
Columbus, OH 212,366,316 – 90,800 2,579,936
Detroit, MI 533,982,288 250,000 250,000 356,960
Grand Rapids, MI 112,564,101 281,380 281,380 –
Indianapolis, IN 275,349,121 52,250 2,069,560 2,207,323
Kansas City, MO-KS 235,220,776 821,000 1,520,040 1,520,040
Milwaukee, WI 224,633,066 112,116 442,691 112,000
Minneapolis/St. Paul, MN 243,653,522 111,000 780,000 828,000
Omaha, NE 67,693,440 – – 77,302
St. Louis, MO 267,789,773 521,718 521,718 436,550
Midwest Total 4,232,452,721 4,583,987 10,675,191 13,282,222
WEST
Albuquerque, NM 36,902,890 – – 242,500
Bakersfield, CA 33,740,065 263,468 284,868 1,807,185
Boise, ID 35,779,701 – 297,067 –
Denver, CO 217,449,730 1,031,381 1,031,381 1,365,314
Fairfield, CA 46,594,360 – 48,133 318,402
Fresno, CA 48,600,000 – – –
Honolulu, HI 40,199,159 – – –
Las Vegas, NV 109,031,302 489,320 618,320 201,519
Los Angeles, CA 888,269,000 356,200 356,200 3,028,100
Los Angeles – Inland Empire, CA 422,587,000 226,600 1,754,900 12,911,100
Oakland, CA 141,658,055 117,170 117,170 975,015
Orange County, CA 182,822,000 83,100 83,100 408,300
Phoenix, AZ 273,175,760 1,427,704 1,873,696 3,773,026
Pleasanton/Tri-Valley, CA 16,425,448 – – –
Portland, OR 191,206,682 142,008 441,090 1,873,838
Reno, NV 82,214,797 – – –
Sacramento, CA 175,079,859 – 131,211 195,000
San Diego, CA 187,080,092 160,479 209,735 59,815
San Francisco Peninsula, CA 40,937,241 38,368 38,368 58,553
San Jose/Silicon Valley, CA 251,303,594 – – 288,100
Seattle/Puget Sound, WA 261,117,654 – 441,250 2,109,989
Stockton/San Joaquin County, CA 94,579,012 474,000 530,000 1,017,353
Walnut Creek, CA 17,749,076 – – –
West Total 3,794,502,477 4,809,798 8,256,489 30,633,109
U.S. TOTALS 14,364,153,695 17,868,520 35,408,632 74,299,029
(continued)
12. P. 13 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
UNITED STATES | INDUSTRIAL SURVEY | ABSORPTION AND VACANCY
MARKET
ABSORPTION
Q2 2013
(SF)
VACANCY RATE
MAR. 31, 2013
(%)
VACANCY RATE
JUN. 30, 2013
(%)
NORTHEAST
Baltimore, MD 439,790 10.02 9.87
Boston, MA (131,178) 17.58 17.68
Hartford, CT (219,824) 8.81 9.08
Long Island, NY 744,028 6.02 5.54
New Jersey – Central 249,929 9.22 9.15
New Jersey – Northern (264,668) 8.35 8.42
Philadelphia, PA 1,007,515 9.69 9.70
Pittsburgh, PA 114,947 7.94 7.90
Washington, DC (212,002) 11.58 11.70
Northeast Total 1,728,537 9.76 9.74
SOUTH
Atlanta, GA 4,517,579 12.79 12.60
Birmingham, AL 49,899 8.94 8.97
Charleston, SC 329,610 10.32 10.11
Charlotte, NC 1,748,347 12.95 12.43
Columbia, SC 402,250 8.03 6.97
Dallas-Ft. Worth, TX 3,783,365 8.85 8.41
Ft. Lauderdale-Broward, FL 285,229 9.41 9.15
Greenville/Spartanburg, SC 1,428,451 9.85 9.04
Houston, TX 336,116 4.98 5.12
Jacksonville, FL 1,359,652 9.99 8.95
Little Rock, AR 94,346 11.78 11.20
Louisville, KY 534,744 8.72 8.41
Memphis, TN 326,619 12.65 12.49
Miami, FL 321,462 6.71 6.63
Nashville, TN 124,320 9.18 9.12
Orlando, FL 53,820 10.42 10.38
Raleigh, NC (256,246) 10.03 10.27
Richmond, VA 1,096,748 11.24 10.49
Savannah, GA (391,696) 11.66 12.54
Tampa Bay, FL (321,642) 9.96 10.19
West Palm Beach, FL 335,723 8.00 7.34
South Total 16,158,696 9.75 9.50
13. HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 14
UNITED STATES | INDUSTRIAL SURVEY | ABSORPTION AND VACANCY
MARKET
ABSORPTION
Q2 2013
(SF)
VACANCY RATE
MAR. 31, 2013
(%)
VACANCY RATE
JUN. 30, 2013
(%)
MIDWEST
Chicago, IL 199,188 9.00 9.03
Cincinnati, OH 657,162 8.12 7.85
Cleveland, OH 380,066 8.62 8.55
Columbus, OH 1,444,523 8.00 7.32
Detroit, MI 493,882 11.42 11.37
Grand Rapids, MI 280,728 7.14 6.88
Indianapolis, IN 409,946 6.82 6.69
Kansas City, MO-KS 852,939 6.13 6.09
Milwaukee, WI 849,506 7.23 6.96
Minneapolis/St. Paul, MN 756,939 8.13 7.86
Omaha, NE (164,030) 5.08 5.35
St. Louis, MO 940,674 8.39 8.20
Midwest Total 7,101,523 8.56 8.45
WEST
Albuquerque, NM 53,347 10.21 10.06
Bakersfield, CA 113,293 3.79 4.35
Boise, ID 848,996 7.84 6.69
Denver, CO 1,824,814 7.80 7.34
Fairfield, CA 780,644 10.30 8.69
Fresno, CA 200,000 9.05 8.64
Honolulu, HI 135,320 3.56 3.21
Las Vegas, NV 969,393 14.80 14.30
Los Angeles, CA 1,649,700 3.75 3.55
Los Angeles – Inland Empire, CA 3,578,100 6.60 5.73
Oakland, CA 1,121,409 7.70 6.98
Orange County, CA 344,600 4.97 4.68
Phoenix, AZ 277,437 12.23 12.58
Pleasanton/Tri-Valley, CA 346,373 9.70 7.59
Portland, OR (627,736) 6.82 7.21
Reno, NV (145,418) 11.79 11.96
Sacramento, CA 1,224,552 13.25 12.61
San Diego, CA 347,598 9.49 9.38
San Francisco Peninsula, CA 295,862 8.20 7.43
San Jose/Silicon Valley, CA 1,845,548 10.16 9.30
Seattle/Puget Sound, WA 540,233 5.65 5.52
Stockton/San Joaquin County, CA 1,114,802 12.58 11.36
Walnut Creek, CA 128,526 9.35 8.63
West Total 16,967,393 7.60 7.24
U.S. TOTALS 41,956,149 8.83 8.63
(continued)
14. P. 15 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
UNITED STATES | INDUSTRIAL SURVEY | SALES PRICE AND CAP RATE AS OF JUNE 2013
MARKET
SALES PRICE
(USD PSF)
MEDIAN
CAP RATE
(%)
VACANCY
FORECAST
(3 MONTHS)
ABSORPTION
FORECAST
(3 MONTHS)
RENT FORECAST
(3 MONTHS)
NORTHEAST
Baltimore, MD 38.55 7.00
Boston, MA 73.00 –
Hartford, CT 38.00 8.50 Close to zero
Long Island, NY 70.23 7.75
New Jersey – Central 85.00 7.20
New Jersey – Northern 92.00 6.00 Close to zero
Philadelphia, PA 56.84 7.13
Pittsburgh, PA 50.00 7.75
Washington, DC 53.28 8.00
Northeast Average* 61.88 7.42
SOUTH
Atlanta, GA 45.33 8.10
Birmingham, AL – –
Charleston, SC 46.00 7.50
Columbia, SC 32.43 –
Dallas-Ft. Worth, TX 55.00 7.20
Ft. Lauderdale-Broward, FL 78.75 –
Greenville/Spartanburg, SC – –
Houston, TX 58.19 8.25
Jacksonville, FL 70.00 7.15
Little Rock, AR 65.45 9.00 Close to zero
Memphis, TN 28.00 –
Miami, FL 55.00 6.70
Nashville, TN 80.00 8.00
Orlando, FL 50.00 7.50
Richmond, VA 48.00 –
Savannah, GA 34.00 8.50
Tampa Bay, FL 33.67 –
West Palm Beach, FL – –
South Average* 51.99 7.79
* Straight averages used.
15. HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 16
UNITED STATES | INDUSTRIAL SURVEY | SALES PRICE AND CAP RATE AS OF JUNE 2013
MARKET
SALES PRICE
(USD PSF)
MEDIAN
CAP RATE
(%)
VACANCY
FORECAST
(3 MONTHS)
ABSORPTION
FORECAST
(3 MONTHS)
RENT FORECAST
(3 MONTHS)
MIDWEST
Chicago, IL 52.00 6.15
Cincinnati, OH 35.00 8.25
Columbus, OH 26.78 –
Detroit, MI 25.45 12.10
Grand Rapids, MI – –
Indianapolis, IN 45.00 7.00 Close to zero
Kansas City, MO-KS 31.00 –
Milwaukee, WI 50.00 9.00
Minneapolis/St. Paul, MN 27.76 –
Omaha, NE – – Close to zero
Midwest Average* 36.62 8.50
WEST
Albuquerque, NM 84.00 8.00
Bakersfield, CA 38.00 10.00
Boise, ID – –
Denver, CO 58.00 8.70
Fairfield, CA 7.59 8.00
Fresno, CA 42.00 9.00
Honolulu, HI – –
Las Vegas, NV 52.79 –
Los Angeles, CA 94.50 6.75 Close to zero
Los Angeles – Inland Empire, CA 72.00 6.70
Oakland, CA 114.94 6.00
Orange County, CA 130.00 6.00
Phoenix, AZ 62.00 8.10
Pleasanton/Tri-Valley, CA 100.40 8.25
Portland, OR 79.25 7.10
Sacramento, CA 60.20 8.03
San Diego, CA – – – – –
San Francisco Peninsula, CA 103.18 –
San Jose/Silicon Valley, CA 275.00 7.00
Seattle/Puget Sound, WA 105.00 6.00
Stockton/San Joaquin County, CA 118.55 8.00
Walnut Creek, CA – –
West Average* 88.74 7.60
U.S. AVERAGE* 64.54 7.73
(continued)
* Straight averages used.
16. P. 17 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
UNITED STATES | INDUSTRIAL SURVEY | RENTS AS OF JUNE 2013
MARKET
WAREHOUSE/DISTRIBUTION
SPACE
(USD PSF)
BULK
SPACE
(USD PSF)
FLEX/SERVICE
SPACE
(USD PSF)
TECH/R&D
SPACE
(USD PSF)
NORTHEAST
Baltimore, MD 4.72 4.39 9.72 –
Boston, MA 6.04 5.30 6.54 11.44
Hartford, CT 4.42 4.42 6.50 6.50
Long Island, NY 8.28 10.00 16.60 –
New Jersey – Central 4.62 4.12 12.19 12.19
New Jersey – Northern 6.29 5.95 9.92 12.26
Philadelphia, PA 4.25 4.15 7.00 11.00
Pittsburgh, PA 4.34 4.34 11.58 11.58
Washington, DC 6.99 5.87 11.54 15.17
Northeast Average* 5.55 5.39 10.18 11.45
SOUTH
Atlanta, GA 3.26 2.94 7.05 10.42
Birmingham, AL 3.85 3.60 8.40 –
Charleston, SC 3.85 4.30 6.25 16.25
Charlotte, NC 3.38 3.20 8.77 –
Columbia, SC 3.54 2.93 7.41 –
Dallas-Ft. Worth, TX 3.20 2.70 7.00 8.50
Ft. Lauderdale-Broward, FL 6.25 5.82 9.55 7.95
Greenville/Spartanburg, SC 3.02 2.99 6.82 –
Houston, TX 5.38 4.44 8.10 10.77
Jacksonville, FL 3.81 3.50 8.57 –
Little Rock, AR 2.68 2.74 7.35 –
Louisville, KY 3.50 3.44 7.50 6.00
Memphis, TN 2.45 2.57 5.06 9.50
Miami, FL 8.06 7.79 10.59 12.00
Nashville, TN 3.05 7.65 8.62 7.50
Orlando, FL 4.43 4.25 8.16 8.49
Raleigh, NC 3.76 3.90 10.09 –
Richmond, VA 3.50 3.57 7.67 7.65
Savannah, GA 3.95 3.75 7.00 10.00
Tampa Bay, FL 4.22 3.89 7.14 5.60
West Palm Beach, FL 6.78 6.18 10.87 7.00
South Average* 4.09 4.10 8.00 9.12
* Straight averages used.
17. HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 18
UNITED STATES | INDUSTRIAL SURVEY | RENTS AS OF JUNE 2013
MARKET
WAREHOUSE/DISTRIBUTION
SPACE
(USD PSF)
BULK
SPACE
(USD PSF)
FLEX/SERVICE
SPACE
(USD PSF)
TECH/R&D
SPACE
(USD PSF)
MIDWEST
Chicago, IL 3.92 3.38 7.14 –
Cincinnati, OH 3.17 2.67 6.37 6.37
Cleveland, OH 3.35 2.95 7.91 –
Columbus, OH 2.70 2.65 5.12 5.12
Detroit, MI 3.85 3.57 7.34 7.34
Grand Rapids, MI 3.25 3.10 4.45 4.45
Indianapolis, IN 4.40 3.20 6.75 –
Kansas City, MO-KS 4.27 3.56 8.94 7.36
Milwaukee, WI 4.33 3.54 5.74 –
Minneapolis/St. Paul, MN 4.50 – 6.43 7.12
Omaha, NE 4.14 5.00 6.36 6.36
St. Louis, MO 3.77 3.69 7.91 –
Midwest Average* 3.80 3.39 6.71 6.30
WEST
Albuquerque, NM 5.48 4.27 8.75 8.75
Bakersfield, CA 4.00 3.42 8.00 –
Boise, ID 4.92 4.92 6.10 5.76
Denver, CO 5.36 3.99 8.48 9.50
Fairfield, CA 5.34 5.57 8.18 8.82
Fresno, CA 3.84 3.60 4.80 5.50
Honolulu, HI 12.00 – – –
Las Vegas, NV 6.00 4.22 5.52 7.32
Los Angeles, CA 6.38 6.20 9.85 12.75
Los Angeles – Inland Empire, CA 4.75 4.55 7.10 7.75
Oakland, CA 4.92 4.64 5.52 8.52
Orange County, CA 7.20 6.60 12.84 13.80
Phoenix, AZ 5.30 4.52 10.84 10.72
Pleasanton/Tri-Valley, CA 5.16 4.20 – –
Portland, OR 5.62 5.17 9.74 10.49
Reno, NV 3.71 3.25 7.75 –
Sacramento, CA 4.32 4.80 8.76 4.44
San Diego, CA 8.04 7.44 10.56 14.64
San Francisco Peninsula, CA 10.32 10.32 23.40 23.40
San Jose/Silicon Valley, CA 6.48 6.01 9.00 16.20
Seattle/Puget Sound, WA 5.88 5.04 13.37 –
Stockton/San Joaquin County, CA 3.84 3.36 6.24 8.64
Walnut Creek, CA 2.52 – – 13.80
West Average* 5.71 5.05 8.97 10.60
U.S. AVERAGE* 4.81 4.49 8.38 9.62
(continued)
* Straight averages used.
18. P. 19 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
CANADA | INDUSTRIAL SURVEY
MARKET
INVENTORY
JUN. 30, 2013
(SF)
Q2 2013
NEW SUPPLY
(SF)
YEAR-TO-DATE
NEW SUPPLY
(SF)
CURRENTLY UNDER
CONSTRUCTION
(SF)
Calgary, AB 127,425,545 1,676,070 2,195,420 1,545,215
Edmonton, AB 80,053,480 631,677 831,827 1,989,133
Halifax, NS 7,614,336 448,477 456,102 87,000
Montréal, QC 347,959,380 – – 180,000
Ottawa, ON 28,134,055 – 64,000 47,500
Regina, SK 16,973,560 44,774 84,774 250,000
Saskatoon, SK 21,300,000 216,000 460,000 350,000
Toronto, ON 760,223,794 1,606,986 1,676,986 4,691,333
Vancouver, BC 184,000,129 939,051 1,612,102 2,437,810
Victoria, BC 9,001,303 – 78,790 –
Waterloo Region, ON 60,281,392 103,794 108,594 61,707
Winnipeg, MB 79,832,082 140,000 140,000 50,000
CANADA TOTALS 1,722,799,056 5,806,829 7,708,595 11,689,698
CANADA | INDUSTRIAL SURVEY | ABSORPTION AND VACANCY
MARKET
ABSORPTION
Q2 2013
(SF)
VACANCY RATE
MAR. 31, 2013
VACANCY RATE
JUN. 30, 2013
Calgary, AB 671,241 4.72 5.45
Edmonton, AB 39,165 3.34 4.05
Halifax, NS (28,387) 9.65 10.15
Montréal, QC (26,169) 4.50 4.49
Ottawa, ON 133,127 5.76 5.50
Regina, SK (15,226) 2.96 3.30
Saskatoon, SK 276,000 5.50 5.16
Toronto, ON (1,576,682) 3.89 4.11
Vancouver, BC (174,411) 3.50 4.09
Victoria, BC (33,423) 4.23 4.50
Waterloo Region, ON 495,397 6.65 6.05
Winnipeg, MB (247,332) 2.97 3.45
CANADA TOTALS (486,700) 4.13 4.37
Millions
-1.58
-0.25
-0.17
-0.03
-0.03
-0.03
-0.02
0.04
0.13
0.28
0.50
0.67
-2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0
Toronto, ON
Winnipeg, MB
Vancouver, BC
Victoria, BC
Halifax, NS
Montréal, QC
Regina, SK
Edmonton, AB
Ottawa, ON
Saskatoon, SK
Waterloo Region, ON
Calgary, AB
ABSORPTION (SF) | CANADIAN MARKETS | Q2 2013
-0.39
0.20
0.41
0.49
1.65
3.58
3.78
4.52
-1.0 0.0 1.0 2.0 3.0 4.0 5.0
Savannah, GA
Chicago, IL
Indianapolis, IN
Detroit, MI
Los Angeles, CA
Los Angeles - Inland Empire, CA
Dallas-Ft. Worth, TX
Atlanta, GA
Millions
ABSORPTION (SF) | SELECT U.S. MARKETS | Q2 2013
19. HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 20
* Straight averages used.
CANADA | INDUSTRIAL SURVEY | SALES PRICE AND CAP RATE AS OF JUNE 2013
MARKET
SALES PRICE
(CAD PSF)
MEDIAN
CAP RATE
(%)
VACANCY FORECAST
(3 MONTHS)
ABSORPTION
FORECAST
(3 MONTHS)
RENT FORECAST
(3 MONTHS)
Calgary, AB 170.00 6.50
Edmonton, AB 125.00 6.72
Halifax, NS – 7.25
Montréal, QC 68.00 7.25
Ottawa, ON 110.00 7.50 Close to zero
Regina, SK 130.00 7.30
Saskatoon, SK 150.00 7.15
Toronto, ON 90.00 7.30
Vancouver, BC 187.00 6.00 Close to zero
Victoria, BC 170.00 7.00 Close to zero
Waterloo Region, ON 66.00 7.10
Winnipeg, MB 71.00 8.25 Close to zero
CANADA AVERAGE* 121.55 7.11
CANADA | INDUSTRIAL SURVEY | RENTS AS OF JUNE 2013
MARKET
WAREHOUSE/DISTRIBUTION
SPACE
(CAD PSF)
BULK
SPACE
(CAD PSF)
FLEX/SERVICE
SPACE
(CAD PSF)
TECH/R&D
SPACE
(CAD PSF)
Calgary, AB 9.00 7.50 12.00 12.00
Edmonton, AB 8.00 7.50 10.00 12.00
Halifax, NS 7.80 7.17 10.50 15.00
Montréal, QC 4.75 4.25 6.00 8.00
Ottawa, ON 8.25 7.50 8.50 11.00
Regina, SK 10.00 10.00 12.00 14.00
Saskatoon, SK 10.00 9.00 13.00 15.00
Toronto, ON 4.88 – – –
Vancouver, BC 7.76 7.30 9.50 14.00
Victoria, BC 11.50 10.00 13.50 13.50
Waterloo Region, ON 4.53 3.77 8.28 8.28
Winnipeg, MB 6.25 5.25 10.00 12.75
CANADA AVERAGE* 7.73 7.20 10.30 12.32
